According to a source speaking to CNBC, former Celsius CEO Alex Mashinsky was detained on federal securities fraud charges on Thursday after the bankrupt cryptocurrency exchange reached a $4.7 billion deal with regulators.
Former Celsius CEO Alex Mashinsky was detained
The SEC and CFTC also accused the exchange of planning to swindle investors of billions of dollars. A record $5 billion judgment was imposed against Meta in 2019 and the $4.7 billion settlement, one of the highest in the FTC’s history, underlines what the agency characterized as Celsius and Mashinsky’s serial deceptions.
Mashinsky was also accused of engaging in different forms of securities fraud and manipulation, as well as wire fraud, commodities fraud, and securities fraud. Mashinsky and Roni Cohen-Pavon, a co-defendant, could spend decades behind bars if found guilty.
According to a charging document from federal prosecutors, Mashinsky “misrepresented, among other things, the safety of Celsius’s yield-generating activities, Celsius’s profitability, the long-term sustainability of Celsius’ high rewards rates, and the dangers involved in storing cryptocurrency with Celsius.”
The FTC-announced settlement won’t be paid until the corporation can release any remaining consumer assets after filing for bankruptcy.
Similar to the federal accusations, Mashinsky is being sued by Celsius and the SEC for defrauding investors by manipulating the price of CEL, the exchange token for Celsius.
The SEC claims Mashinsky and his firm “misrepresented” Celsius’s “central business model and the risks to investors” by stating the company did not engage in hazardous trading and paid the majority, but not all, of its money over to investors.
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For instance, Celsius purportedly faced institutional loan defaults totaling “hundreds of millions of dollars”.
The SEC complaint and the charging documents from the federal prosecutors in New York both refer to Celsius’ exchange token as a security. Other cryptocurrency exchanges have been vehemently disputing the SEC’s authority over the crypto markets and the definition of a security in recent months.
Alex Mashinsky was charged with plotting a $20 billion fraud against investors by New York prosecutors earlier this year. Before the crypto exchange declared bankruptcy in 2022, CNBC had previously written about the widespread, long-standing problems that had plagued it.